Market report: Thursday close

RECORD oil prices are back in the spotlight and have put the skids under share prices worldwide.

Overnight on the futures market, the price of a barrel of oil reached a new high of $54.95. Today it came off the boil to $54.41, but traders say it is now only a matter of time before it breaches $55.

Cold weather, political tension in the Middle East, demand from China and a lack of refining capacity have been fuelling the rise. Dealers say the situation is unlikely to get any better in the short term and will begin to drive up the cost of petrol on forecourts.

Dearer fuel may be good news for the coffers of BP and Shell but is bad news for industry and, consequently, investors.

The Dow fell sharply on Wall Street last night and continued its slide today with an 18-point drop by lunchtime to 10,787. The slide extended to the Far East with Tokyo and Hong Kong suffering heavy falls.

That spilled over into London, where the Bank of England monetary policy committee decided to peg interest rates. Meanwhile, the dollar wobbled amid threats by Japan to switch out of dollar-denominated assets.

The FTSE 100 index closed down 34 points at 4,962.1, not far off the day's low. Profit taking across oil and mining stocks added to the macroeconomic worries.

BP, down 12&frac12;p at 557p, Shell, 10&frac14;p lower at 488&frac34;p, and BG, 5&frac14;p cheaper at 409&frac14;p, were the biggest fallers among blue-chips, shaken by renewed calls for a windfall tax to be introduced by the Government to take advantage of the bumper profits enjoyed by the oil suppliers.

Cairn Energy was another casualty, slipping 16p to 1212p. The oil and gas explorer has been booted out of the FTSE 100 after just six months. Last year, the shares were chased up to a peak of 1570p on the back of prospects for its project in India.

It will be replaced by International Power, &frac34;p better at 179&frac14;p.

Mining shares were also marked lower. Xstrata was down 30&frac12;p at 1046p after losing the battle for control of WMC Resources to BHP Billiton, off 16p at 737p.

Reuters fell 4&frac12;p to 412p as broker UBS downgraded from buy to neutral while repeating its 275p target. The shares have risen 13% since the start of the year and it sees little scope to push them any higher in the short term.

Sportswear manufacturer Umbro touched a new high with a rise of 3&frac12;p to 126p. Venture capital backer Doughty Hanson has sold 35m shares at 124p but continues to hold a further 48m, or 33%. Umbro was floated last June at 100p after the share price had been scaled back by a third.

Retailer GUS put on 11p to 920p but there is a feeling the shares may have run their course for the time being at least. They started the year at 950p and touched a peak of 989p, but now appear to be running out of steam.

Deutsche Bank has replaced the Argos and Homebase owner on its Pan-European Focus List with luxury cruise operator Carnival, up 12p at 2993p. It continues to rate GUS a buy but sees better value elsewhere.

Supermarkets chain J Sainsbury rose 3&frac14;p to 293&frac12;p after the latest survey showed the group's loss of market share to the likes of Tesco, 5&frac34;p better at 314&frac12;p, Asda and Wm Morrison, 4&frac34;p higher at 222&frac12;p, had begun to slow.

Bob Morton's Harrier rose 2p to 14&frac34;p after the company agreed to sell three businesses to Matrix Communications for £4.5m. Harrier has been the subject of several aborted bid approaches in the past few months.